Brown v The NSW Trustee & Guardian & Anor

fendant) State of New South Wales (second defendant) Representation: Counsel: Mr Ash (plaintiff) Mr Hill and Ms Pringle (first defendant) Solicitors: Burt & Allen Lawyers (plaintiff) NSW Trustee & Guardian (first defendant) File Number(s): 2010/313444

Judgment (ex tempore) 1HIS HONOUR: The late Ian Gammidge sold his cottage in Surrey England in October 2000. The proceeds from the sale were paid into the bank account of his son, the late John Gammidge, who in about April 2001 applied them to purchase a property in his own name in Countess Street, Mosman. Ian's executor and heir, the plaintiff Felicity Anne Brown, claims that the Mosman property is beneficially owned by Ian's estate, by reason of an express or resulting trust arising from the circumstances in which it was purchased and/or breach on the part of John of a fiduciary obligation as owed by John to Ian, or as a result of the operation of the equitable doctrines of unconscionable dealing or undue inference. Without intending any disrespect, throughout the course of these reasons, I will refer to the central protagonists by their first names. 2John's legal personal representative, the first defendant NSW Trustee & Guardian, as well as disputing the plaintiff's claims, contends that conduct of Ian - by himself and by his attorney Felicity - after 2000 precludes Ian's executor from now disputing the transaction. The second defendant is the State of New South Wales, which is the sole beneficiary of John's New South Wales estate, he having died intestate, with no next-of-kin entitled to take upon intestacy. The evidence 3It is necessary to bear in mind when it comes to considering the facts of the December 2000 transaction, that both principals are deceased. Thus the two people who could best inform the Court of what happened are unavailable. While Felicity has some knowledge of the circumstances, she was on the periphery of the transaction then. Her knowledge is plainly incomplete and much of it, derived subsequently, appears to be of a hearsay character. The solicitor who acted on the transaction was not called, although the contents of his file were available. They are, themselves, relatively sparse. The relevant evidence falls into two categories. The first is such direct evidence as is available pertaining to the December 2000 transaction, and the second is evidence emanating from subsequent inquiries into it, largely as a result of proceedings in the NSW Guardianship Tribunal concerning John. 4In or about October 2000, Ian, John and Felicity had a conversation, which is related by Felicity in her affidavit in the following terms: Ian asked John and myself to look after the sale of his house, West Heath Cottage, also in Pirbright. Ian said to us words to the effect "I know I am never going to be able to move back home again so I would like you two to get an estate agent in and get the house sold. Split the money between you. I don't need it. My pension easily covers all my outgoings here". He also said to us words to the effect: "I want you to sort out the house contents for me. There are a lot of things that have been in the family for years and I don't want them sold. You can share them out between you two and Patrick. I know there are some things that he would like to have". I observed and understood that John took exception to Ian's request to me that I be involved in the sale and distribution. 5Subsequently, John, on his own (that is to say, without Felicity's involvement), retained a solicitor, Mr Murphy, to act on the sale of the Surrey cottage. An attendance note dated 23 October 2000 made by the solicitor records a telephone call from John advising that his father had gone into a retirement home and that they had secured a buyer for the cottage. A further handwritten file note of the solicitor, apparently dated 5 December 2000, is in the following terms: Telephoned John Gammidge when I confirmed to him that his letter/contract etc was ready for collection. He asked if it was possible for the net proceeds to be paid to him into his a/c in Australia as his father wants to buy a house out there which he will do in his name. (His father doesn't want to leave the country yet while wife is still alive). I said we would need written instructions from his father and his a/c details and that this could be arranged. He asked if we could draw up letter for father just to sign - I said this would be okay. Engaged 4 mins. 6Mr Murphy duly prepared such a letter, which was signed by Ian, in the following terms: Dear Mr Murphy, Re: MY SALE OF WEST HEATH COTTAGE Please accept this letter of my formal instructions for you to pay the net proceeds of sale to my son John Gammidge directly into his account in Australia. 7It is a reasonable inference - from a letter from Mr Murphy to John of 13 December 2000, confirming that contracts were exchanged on 8 December, with completion to take place on 20 December - that those instructions were probably signed prior to 13 December. The sale was completed on 19 December 2000 and the proceeds, amounting to 462,446, were paid by cheque to John that day. 8John remained in England until about September 2002. In January 2001, Ian instructed his stockbrokers to transfer his valuable share portfolio, worth in the order of 350,000 (equivalent to about $1 million (AUD) at the time), to John, but upon terms that Ian would remain entitled to the income during his life time. As will appear from evidence to which I shall come, Ian pursued this transaction notwithstanding advice from stockbrokers that there were more efficacious ways of implementing it, and the arrangement that he would remain entitled to the income appears to have been an oral one between him and John. (These matters emerge not from contemporaneous documents, but from information elicited by inquiry in 2002 and 2003, as I shall describe). 9There is effectively no other direct or contemporaneous evidence illuminating the circumstances of the December 2000 transaction. 10Following his return to Australia in about September 2002, John, who was mentally unwell and appears to have been affected by alcoholism, was the subject of an application, made by his then de facto wife Janette McClellan, to the Guardianship Tribunal for orders for financial management and guardianship. In connection with that application, Ian, on 2 December 2002 authorised Burt & Allen Solicitors in New South Wales to act on his behalf. On 10 December 2002, a request to be joined as a party to the proceedings was made on behalf of Ian; it was signed and presumably completed by his New South Wales solicitor, Mr Burt. It included the following statement: I am the father. Am 86 years of age and have no financial interest in the matter other to ensure my son's best interests are protected. 11On 11 December 2002 an officer of the Guardianship Tribunal spoke to Ian, who said that he did not recall signing and sending a letter to Mr Burt authorising him to act and that Felicity was dealing with the issues regarding his son's finances, but also that he had no objection to Ms McClellan's application, though requesting that Felicity be contacted regarding it. 12Having been informed of that conversation - including a statement attributed to Ian to the effect "I'm a bit senile" (when saying he had no recollection of signing the authority to Mr Burt) - Felicity responded on 18 December that she had spoken to Ian's GP, who was writing a letter stating that he was definitely not senile. On 17 December 2002, Doctor Bishop in Surrey certified: In my opinion the above named [Ian Gammidge] is of sound mind and does not suffer from senile dementia. He suffers from a normal degree of forgetfulness only to be expected in an 80 year old, particularly when woken from sleep by a telephone call in the middle of the night. 13That certificate was forwarded by Felicity to Burt & Allen. On 19 December, Felicity informed an officer of the Guardianship Tribunal that the shares owned by Ian were put into John's name for safe keeping when Ian had been very ill some time ago; that Ian needed the income from the shares for his day-to-day needs and was currently receiving the income from the portfolio; and that Ian was considering taking legal action in the United Kingdom courts to have the share portfolio returned to his own name, but they would await the Tribunal's decision before deciding what course to take. It does not appear that any doubt was then raised concerning the ownership of the Mosman property. 14Also on 19 December 2002, Ian made a will in Surrey appointing Felicity and Mr Murphy as his executors and trustees and providing for the residue of his estate (after payment of executorship expenses and inheritance tax) to be paid to Felicity, and if she predeceased him, to her children. Although the evidence does not disclose precisely when, it seems that by about this time, Ian had also appointed Felicity his Attorney under Power. 15On 24 December 2002, the Guardianship Tribunal appointed the Public Guardian as John's guardian for a period of 12 months and committed his estate to the Protective Commissioner for management. Those orders were subsequently continued. 16On 24 February 2003, the Office of the Protective Commissioner wrote to Ian, inter alia : I understand that you generously provided John with funds to purchase his residence at Mosman almost two years ago. Similarly there is a large portfolio of shares that you settled upon John from which the income remains your property. Who else can we contact in order to obtain fuller details of these arrangements and what other significant persons should we be contacting in order better to manage John's affairs? 17By his attorney Felicity, Ian instructed solicitors in London, Calvert Smith & Sutcliffe, to act for him, and they replied to the Office of the Protective Commissioner on 21 July 2003, relevantly as follows: We have been asked by Mr Ian Gammidge's attorney, Mrs Felicity Brown, to look into the circumstances whereby Mr Ian Gammidge's portfolio of shares were transferred to his son, John, with Ian Gammidge continuing to receive dividend income therefrom. We confess that we are having some difficulty in ascertaining the full facts from the brokers but hope to be able to report to you fully concerning this within the near future. ... From our point of view as solicitors for Mr Ian Gammidge, we are extremely concerned [about] the purported gift because, as a direct result of this, our client has incurred a significant capital gains tax liability which he is unable to pay... 18On 31 July 2003, the Office of the Protective Commissioner responded to Calvert Smith asking if any information relating to the share portfolio could be referred to the Office for consideration, as it had been unable to make any decisions about John's investments in the absence of any details. Calvert Smith replied, on 13 August 2003, that they had now had an opportunity to speak with the brokers regarding the portfolio, and hoped to respond very shortly. They did so by letter of 29 September 2003. This letter is a very important document in the proceedings, and I extract it in full (emphasis added): We write further to our letter of 13 th August 2003 and are now able to report to you in detail concerning your client's portfolio of shares currently held by J M Finn & Co, brokers. As you are aware, we are instructed by John Gammidge's father, Ian Gammidge, via his attorney Mrs Felicity Brown. We enclose a certified copy of the enduring power of attorney for noting in your records. The background to the matter is that around two years ago, when Ian Gammidge was aged 84, he was in the process of selling his home and moving into sheltered accommodation. His assets at that stage comprised his home, valued at 463,300, and the share portfolio in question, at the time held by S G Banking, valued at 255,605,52. His income comprised his State pension, an Occupational pension and the dividend income from the portfolio of shares. John Gammidge was at that time living in Australia but came to the UK to support his father with the move. Before turning to the gift of the shareholdings I would like to draw to your attention circumstances regarding the sale of Ian Gammidge's property. The house was sold on 20 th December 2000 and the net proceeds of sale of 462,445.99 were sent to John Gammidge's bank account in Australia. His explanation to the solicitors was that his father wished to purchase a property in Australia. The solicitors prepared a note for Ian Gammidge to sign confirming this and John Gammidge obtained his father's signature to this. Ian Gammidge has no recollection of signing the document. At no time did the solicitors visit Ian Gammidge personally in hospital, or speak with him, and the file suggests that they had no knowledge of the seriousness of his illness at that time. It is our opinion that the solicitors instructed in the sale of the property were possibly negligent in not obtaining Ian Gammidge's instructions in person. We do not know, as Ian Gammidge has no memory of these events, whether he intended to gift the proceeds of sale of his home to his son John. That said, Ian Gammidge would not wish to pursue any claim for return of the property from his son or any claim for negligence against the solicitors, as his own health is extremely frail and he would be unable to withstand the rigours of a complicated court case. In addition, he would have no desire to bring any action against his son, for whom he cares very much. At the time the transfer was made, being 7 th February 2001, Ian Gammidge was recovering from the serious illness which had hospitalised him in late 2000. Although Ian Gammidge now has no recollection as to the transfer of shares, there is no suggestion that at the time he was lacking in mental capacity. As the shares were held in a nominee account, all that was required to process the transfer was a simple note signed by Ian Gammidge. A note was prepared by S G Banking for Ian Gammidge as an example of the type of document they required and Ian Gammidge in fact signed the draft. Michael Mould visited Ian Gammidge before the document was signed and, at that time, formed the opinion that Ian Gammidge had the mental capacity to make the decision to transfer the portfolio. We have examined Mr Gammidge's hospital and GP records for this period, which tend to support this view. As regards the capital gains tax consequences of the transfer of shares; Mr Mould drew this to Ian Gammidge's attention and Ian Gammidge confirmed that he and his son John had spoken to Ian's accountant regarding this. Mr Mould therefore felt that Ian Gammidge had received separate advice concerning this. We have also spoken with Ian Gammidge's accountant, who confirms that transfer of the entire portfolio was discussed and he advised against this, as the capital gains tax consequences would be severe. The accountant advised a graduated transfer of shares over a period of years from father to son, in order to gain maximum benefit from the annual CGT allowance. We questioned David Higham regarding the fact that the dividends continued to be paid to Ian, rather than to John, and were advised that this was a verbal understanding at the time between father and son, and another was recorded on paper with S G Investments. David Higham has advised us that he is willing to write to you directly should you so wish. In acting on Ian Gammidge's behalf, we have two areas of concern, namely: